Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to Martin Marietta's first quarter 2019 earnings conference call. My name is Howard, and I will be your coordinator today. At this time, all participants have been placed in a listen-only mode. A question-and-answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded. I will now turn the call over to your host, Ms. Suzanne Osberg, Vice President of Investor Relations for Martin Marietta. Ms. Osberg, you may begin.

Good morning, and thank you for joining Martin Marietta's first quarter 2019 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas, Senior Vice President and Chief Financial Officer. To facilitate today's discussion, we have made available during this webcast and on the investor relations section of our website, Q1 2019 supplemental information that summarizes our quarterly results and trends. As detailed on slide two, This conference call may include forward-looking statements, as defined by securities laws in connection with future events, future operating results, or financial performance. Like other businesses, we are subject to risks and uncertainties that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments, or otherwise. we refer you to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC website. As a reminder, all financial and operating results discussed today are for the first quarter 2019. Any comparisons are versus the prior year first quarter, unless otherwise noted, and all margin references are based on revenues. Furthermore, non-GAAP measures are defined and reconciled to the nearest GAAP measure in our Q1 2019 Supplemental Information and SEC Filings. We will begin today's earnings call with Ward 9, who will discuss our first quarter operating performance as well as market trends. Jim Nicholas will then review our financial results. A question and answer session will follow. I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today's teleconference. Martin Marietta's strong first quarter performance provides a promising start to what we expect to be another record year for our company. Consolidated total revenues increased 17% to $939 million, and earnings before interest, taxes, depreciation, and amortization, or EBITDA, increased 28% to $159 million, both new first quarter records. We also achieved strong gains in other key financial metrics, including a 140 basis point expansion in consolidated gross margin and earnings per diluted share of 68 cents. Notably, shipment volume and pricing improved across the majority of our building materials business, including robust double-digit growth in aggregate shipments as more favorable weather allowed for an earlier onset to the construction season, and our customers were able to begin addressing both prior years' weather-deferred projects and current backlogs. Consistent with our expectations, public and private sector construction growth in our leading markets is outpacing the nation as a whole and supports our view of continued pricing momentum. These trends bode well for increased construction activity and position Mark Marietta for improved shipments, pricing, and profitability for the remainder of 2019. We have consistently maintained that attractive market fundamentals, including continued employment gains, population growth, and superior state fiscal health will promote sustainable and long-term construction growth across our geographic footprint. Our first quarter results clearly demonstrated that robust underlying demand, demand that failed to translate into higher shipment volumes in 2018 due to contractor capacity constraints, logistics disruptions, and most significantly, poor weather. For example, our Heritage Mid-Atlantic Division, which includes the Carolinas, Virginia, and Maryland, benefited from strong pent-up demand and more favorable weather conditions. These dynamics, just to name a few, resulted in heritage aggregate shipments that eclipsed the division's 2007 peak first quarter volumes. While winter weather traditionally limits the ability of outdoor contractors to perform work, modestly improved weather in the first quarter of 2019 provided contractors the opportunity to advance both new and delayed projects. The notable exception was in Colorado, the company's second largest state by revenues. Colorado experienced one of its harshest winters on record in terms of precipitation and temperatures, limiting construction activity and negatively affecting the aggregates, ready-mix concrete, and asphalt and paving businesses of our Rocky Mountain division. Heritage aggregate shipments increased 12.5%, led by double-digit volume gains in the Mid-America and Southeast groups. Importantly, all divisions, with the exception of Rocky Mountain, contributed to this robust shipment growth, demonstrating the strength of Martin Marietta's markets and breadth of accelerating demand. Heritage aggregate shipments to the infrastructure market increased 2% as modestly improved weather, particularly in the southeast, allowed customers to commence transportation-related projects earlier in the construction season. Importantly, Our North Carolina, Georgia, and Florida operations saw increased infrastructure activity during the quarter following the recent acceleration in public lettings and contract awards in these key states. Consistent with our expectations when we established 2019 guidance, we believe public construction, particularly for aggregates-intensive highways and streets, is poised for meaningful growth in 2019 and beyond, driven by funding provided by the Fixing America's Surface and Transportation Act, or FAST Act, and numerous state and local funding initiatives. Our top ten states, which accounted for 85 percent of total building materials revenues in 2018, have all introduced incremental transportation funding measures within the last five years. Increased state-level funding through bond issuances, toll roads, and tax initiatives is expected to continue to grow at a faster rate than near-term federal funding, leading to additional growth opportunities for our company. The infrastructure market represented 33% of our first quarter heritage aggregate shipments, which is below the company's most recent 10-year annual average of 46%, but consistent with first quarter historical trends. Heritage aggregate shipments to the non-residential market increased 33 percent as we continued to benefit from robust distribution center, warehouse, data center, and wind turbine projects in key geographies including Texas, the Carolinas, Georgia, and Iowa. Looking ahead, our non-residential construction outlook remains positive with third-party forecasts including the Dodge Momentum Index projecting healthy commercial construction activity particularly in our southeastern and southwestern regions. Additionally, large energy sector projects along the Texas Gulf Coast are expected to increase demand for heavy building materials. Throughout the balance of 2019, the company will continue to supply products for three previously awarded energy projects. Five additional projects are pending regulatory approvals or awaiting contractor and or supplier selection and are expected to begin in earnest in 2019 and continue for several years thereafter. Martin Marietta is well-positioned to provide the aggregates, cement, and ready-mix concrete needs for these multi-year projects. The non-residential market represented 37 percent of first-quarter heritage aggregate shipments. Heritage aggregate shipments to the residential market increased 8 percent, driven by weather-deferred homebuilding activity in the Carolinas, Georgia, and Florida. Despite the recent slowdown in housing unit starts at the national level, the residential outlook across Martin Marietta's geographic footprint remains positive, driven by favorable demographics, job growth, land availability, steady interest rates, and efficient permitting. Currently, housing unit permit growth for our top 10 states is outpacing the national average for all three residential categories, total, multifamily, and single family. In our view, The issuance of these permits represent the best indicator of future housing construction activity. The residential market accounted for 23 percent of first-quarter heritage aggregate shipments. To conclude our discussion on end-use markets, the Chemrock rail market accounted for the remaining 7 percent of first-quarter heritage aggregate shipments. Volumes to this sector increased 9 percent, reflecting lower-balanced and agricultural line shipments. Heritage aggregates pricing improved 4 percent following the implementation of annual price increases throughout the majority of our geographic footprint. We were able to achieve this solid growth despite unfavorable product mix from increased shipments of lower priced base stone, which reduced first quarter heritage average selling price by 29 cents per ton or 210 basis points. Keep in mind, An increase in base stone shipments is only unfavorable from an average selling price optics viewpoint. In fact, given that base stone is typically the initial material needed for early stage construction activity and higher price clean stone shipments subsequently follow, we're encouraged by this trend. Drilling down to geographical trends, we achieved heritage price and growth of 3% for the Mid-America Group. This was accomplished through continued price discipline, offset by product mix from base shipments. Price discipline led to 6% heritage price and growth for the Southeast Group. Product and geographic mix, particularly from weather-impacted Colorado shipments, limited West Group price and growth to 3%. Acquired operations shipped 3.5 million tons at selling prices approximately 15% below the corporate average. As a reminder, beginning in the second quarter, Results for the legacy bluegrass operations will be classified as heritage for reporting purposes. Cement shipments improved 7%, driven by the strength of the Texas market, increased shipments of oil well products, and the addition of our new Caney sales yard in Houston. First quarter cement pricing benefited from favorable product and geographic mix, increasing 4%. Annual price increases went into effect on April 1st with widespread support in both north and south Texas. We believe our cement operations will continue to benefit from a tight supply environment in Texas, as forecasted demand is expected to exceed domestic production capacity by 10% in 2019. Turning to our downstream businesses, ready-mix concrete shipments decreased 4% as Colorado's harsh winter hindered early construction activity in that state. First quarter pricing improved modestly for the ready mix business in total, led by a 3% increase in Colorado. As a reminder, the majority of annual price increases became effective on April 1st in both Colorado and Texas. Our Colorado asphalt and paving business lost production days from extreme winter weather, including freezing ground temperatures, resulting in reduced asphalt shipments. First quarter asphalt pricing in Colorado improved 4%, Importantly, bidding activity and customer confidence remain strong, and we're highly confident in the strength of the Colorado market. I'll now turn the call over to Jim to discuss specifics of our first quarter financial results. Jim?

Thank you, Ward. The building materials business achieved record first quarter products and services revenues of $809 million, an 18 percent increase, and gross profit improved 39 percent to $118 million. Aggregate's product gross margin expanded 550 basis points to 18%. Steadier and higher shipment and production levels provided improved operating leverage, which, in conjunction with higher prices, drove the majority of the margin improvement. As Ward highlighted, our cement operations benefited from strong volume and price and growth. However, despite this top-line improvement, extended maintenance outages, higher rail freight costs, and reduced operating leverage from lower production levels led to 1,270 basis point degradation in product gross margin. Outages included planned and unplanned repairs at both cement plants and the acceleration of maintenance activities originally planned for later in the year. With over half of our 2019 planned maintenance completed, we are returning to normal production capacity at all kilns and are well positioned to benefit from growing demand and a robust bidding pipeline throughout the remainder of the year. In late 2018, we initiated a restructuring of our Southwest Ready Mix Concrete business and are pleased with the initial results. These efforts contributed to the 100 basis point improvement in that business's quarterly product gross margin despite relatively flat shipments and pricing. Magnesia Specialties continued to benefit from strong domestic steel production and increased global demand for magnesia chemical products, generating product revenues of $69 million, a new quarterly record. Additionally, the business achieved record first quarter product gross profit of $27 million. Product gross margins held steady at an attractive 38.5%, thanks to price improvements and production efficiencies that helped offset increased sales of lower margin products and higher costs for supplies and contract services. Our consolidated results included the benefit of two non-recurring items. First, we reversed a $4 million purchase accounting accrual related to the TXI acquisition, which is recorded in other operating income net as an increase to earnings from operations. we recorded a discrete income tax benefit of $13 million from a change in the tax status of the subsidiary from a pass-through entity to a C corporation, which reduced tax expense for the quarter. Neither of these items should be extrapolated in a run rate calculation. Excluding the first quarter tax benefit and other discrete events, we expect our estimated tax rate for full year 2019 to range from 20 to 22%. As we look to the rest of the year, our capital allocation priorities remain unchanged, with a continued focus on creating shareholder value through value-enhancing acquisitions, prudent organic capital investment, and the opportunistic deployment of free cash flow through dividends and share repurchases, all while returning to our target leverage ratio. Capital expenditures are expected to range from $350 million to $400 million for the full year as we invest in high-return projects focused on increasing efficiency to drive margin expansion. Since the announcement of our share repurchase program in February 2015, we've returned more than $1.4 billion to shareholders through a combination of share repurchases as well as meaningful and sustainable dividends that were increased 9% last August. The trailing 12 months ended March 2019. Our ratio of consolidated net debt consolidated EBITDA, as defined in our applicable credit agreement, was 2.7 times. While this remains modestly above the top end of our target leverage ratio, we expect to continue deleveraging in return to our target leverage ratio of 2 to 2.5 times by year end. With that, I will turn the call back over to Ward.

Jim, thanks. To conclude, we remain highly confident in our outlook for the balance of 2019 and as outlined in today's release, have reaffirmed our four-year guidance. Remember, our outlook contemplates an improvement in weather conditions from the extreme conditions we experienced in our regions in 2018, but nonetheless wetter than historic norms. While we were pleased with our first quarter performance and are confident in our outlook for the rest of the year, we believe it's premature to raise four-year guidance based solely on these results. As we have often noted, The first quarter results are typically disproportionately driven by construction activity during the last two weeks of March. We will consider whether it's appropriate to revisit our outlook later in the year. We believe attractive population and employment trends, combined with positive momentum from state departments of transportation and continued private sector gains, will support sustainable construction growth in our key regions for the rest of the year and for future periods as well. In 2019, we anticipate the growth in our top 10 states to outpace the nation as a whole and contribute to positive volume and pricing trends across all of our product lines, underpinning our confidence that our company is on its way to posting another record year. As Morton Marietta celebrates 25 years as a public company this year, we'll continue with the approach that has proven to be successful. a focus on price discipline, strategic geographic positioning, and prudent capital allocation, and underscored by our commitment to safety. That's why we remain confident about Martin Marietta's ability to achieve continued profitability growth and create value for our shareholders. If the operator will now provide the required instructions, we will turn our attention to addressing your questions.

Ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. Again, if you have a question or comment at this time, please press star then 1 on your telephone keypad. Our first question or comment comes from the line of Catherine Thompson from Thompson Research Group. Your line is open.

Hi, thank you for taking my questions today. The first question is on ASPs. Two-part question. First, could you confirm that there was not as great of an inventory build in Q1 19 versus last year? Because that certainly does seem to be the feedback from the field, from the industry in general. And then the second follow-up to that, could you give more quantification of that commentary that you had in prepared comments about a greater mix of basestone? How, to what degree did that impact Q1, either in percentage or basis points? What does it mean for visibility going forward for volumes, and what does it mean for mix going forward?

Good morning, Catherine. This is Ward. Thanks for your question. A couple of things. One, yes, we did have actually inventory drawdown in the first quarter of this year, so we did not have the build that you saw last year. So that's the first part of your question. I think the other part of your question is a really good one, and it's one I'm happy to try to address because I think this is an important notion for us to really hit very clearly. If we're looking at the first quarter of 2018 relative to products that went out, here's the way I would encourage you to think about it. About 25% of our product last year was Baystone. Somewhere between 28% and 29% of it this year was Baystone. Last year, almost 52.5% of it was Cleanstone. This year, 50%. Here's my point, Catherine. If you're seeing more base stone go out today, that's newer projects that are beginning from the ground up and are likely to last a longer period of time. At some point, you're going to put asphalt or concrete on top of base stone, so we're going to get those clean stone sales as they come through. Greater base stone sales, in my view, is longer-term, nice projects that portend well for the balance of 2019 and really, I think, start to tell a good story for 2020. But here's what's important to it as we go through that. If we take a look at what our ASP on our heritage business would have been this quarter if we had had the same mix that we had last quarter, our ASP for heritage would have improved 6.1%. So that's a 210 basis point improvement. And we think seeing more Baystone is attractive. We think that type of price and growth in our heritage business is also attractive. And I do think I responded well. to your question relative to the inventories as well.

A follow-up on the cement, just a clarification. Could you quantify how perhaps the dollar impact this quarter versus a typical Q1 or perhaps last year in terms of how high our maintenance cost was? And then you said there were some planned and unplanned. maybe just a little bit more clarification on planned versus unplanned maintenance.

You know, let's do it this way. I'll ask Jim to help double-team on this. Let me start the conversation in this regard. As we came into the year, Catherine, what I would say is we anticipated having about $19.2 million worth of expense relative to the kilns during the course of the year. What we've done in the first quarter is we've spent or invested $11.2 million of that. So, if you look at what that looks like over a period of years, that's clearly accelerating a lot of that into the first quarter. And our thought process is several-fold, but primarily driven by the notion we want to be in an attractive place to run the business very aggressively as we go into the pure summer months in that Texas market. I'll ask Jim to speak very specifically to some of the dollars around maintenance, inventory, and some other issues that do affect the financials.

Good morning, Catherine. The breakdown between the maintenance expense was about $10 million more this quarter versus Q1 of 2018. Of that 10 million higher expense, six of that was planned, about a little under four of that was unplanned. So that's about 10 percentage points on the gross margin side. The other items that impacted cement, let me just round out the whole cement gross margin walk for clarity. We did have, because we sold, we had good sales growth of shipments The production was lower given the downtime. We had to dip into our inventory in a deeper way, which resulted in a $6 million headwind for the quarter, again, versus prior year. Those are the two biggest impacts, maintenance and inventory drawdown. The third item was increased freight. It was about $2 million as we had to supply two new distribution outlets. So those are about $2 million of extra expense. Those are the three biggest items that impacted gross margin for the cement business.

And Catherine, what I would add on to that is obviously increased transportation is moving primarily into New Caney and Houston and moving out west to Odessa. So those are some additional charges that we actually view as very welcome.

Okay, and final, just a quick cleanup question on guidance and change. Appreciate that Q1 season was a smaller contributor. We know that on average for the industry, from the checks we've done, maybe 20% of your volumes But could you remind us, perhaps, on a historical basis, how much of earnings typically hit in Q1? And I guess the one thing, noticing, I just wanted to make sure that we're right on this. It looks like, for the first time, a big difference this year versus last year, having all three end markets, Resnaw and Res and Public, growing. Could you, just for our sake, just ensure that there's no change in conviction, even though the numbers haven't changed, but is there any change in the conviction for the year? Thank you.

Catherine, thank you again. Look, we feel very good about the year, and we feel very good about the start. As we said in the prepared remarks, we don't feel like it's the right moment to come back and revisit guidance at all yet. And to your point, if we look at a five-year average, here's what I would tell you. Five-year average would show 19% of shipments occur in the first quarter, 19% of revenues in the first quarter. To your point very specifically, Catherine, 12% of gross profit, and around 12% of EBITDA. So, again, I think we're sitting in a very attractive place. Everything that we see and everything that we hear from customers for the year looks wonderful at this moment, and you're certainly not hearing anything that tends to be a lack of conviction from us on the full year.

Thank you very much.

Thank you, Catherine.

Thank you. Our next question or comment comes from the line of Trey Grooms from Stevens. Your line is open.

Thank you. Good morning. So the first question I have is on aggregates, incrementals. You know, you guys saw an improvement, and I think by my math, the incrementals were about 38%, 39%. And I know it's difficult to look at incremental margins on a quarter-to-quarter basis, but you guys are, I believe, looking for full year to be around the 60% range. So can you talk about some of the factors impacting 1Q that maybe won't be an issue in future quarters or how to think about the bridge in incrementals margins for aggregates kind of getting to that 60% range through the year?

Good morning, Trey. Thanks for your question. A couple of things. I do think it's important to hit just what you said, and that is remember that's 60% on average in the aggregates business. So I want to make sure that we're talking about that. Obviously, Q1 is a little bit different because you don't have significant portions of the aggregates business that are really running the way that we'd expect them to for a full year. So with that as a caveat, let me turn it over to Jim to walk you through some of the math on where it looked like for the quarter and how we think that shakes out for the year.

Good morning, Trey. Two things I'd like to point out. One, the headline number is, in fact, 30% incrementals. But what that's missing is the fact that we didn't have bluegrass in Q1 of 2018. If you were to do a pro forma calculation, including bluegrass, the incrementals would go to 51 percent, so about a 13 percent improvement, just that simple math change. In addition, we increased the tons we shipped predominantly via rail in this quarter by 17 percent, and that led to higher freight costs for the quarter, which would account for another 13 percent incremental points, getting us to closer to 64 percent, just taking those two items into account.

And that's still the case, just kind of looking on a full-year basis, is for the overall business to get back to that kind of 60% range. That's the outlook.

That's right. That's what we're still expecting, the overall aggregates business. That's correct, right?

Yes, yes, for aggregates. Thank you. And then secondly, on the infrastructure side, up 2%, I think, which it kind of lags some of the other end markets, and I think you're looking for infrastructure now to be kind of high single digits. Can you talk about, you know, what you're seeing there on that end market and how we should see that progress as we go through the year with that kind of coming out of the gate a little slower?

Yeah, I guess what I would say, Trey, in many respects, if you think about the way DOT specifications work, There's not going to be a lot of asphalt paving in particular in most jurisdictions until after you get by March 15. So, again, if we're looking at the rhythm and cadence of the way that the year is building, we're not at all surprised by where infrastructure sits here at the end of the first quarter. I think if we go back to that commentary I gave you early on about seeing more baystone, I think that's the type of work you're going to see being driven toward infrastructure this year. And what I would say, too, is simply looking at the states that matter most to us. I mean, Texas is looking at $8.2 billion worth of letting this year. That's a very big job, very big number. And we're seeing a number of very attractive design-build jobs in that state. If we look at Colorado, that did not have a particularly great year last year, 2019 looks a lot better. They're looking at a $2.2 billion DOT budget versus $1.6 billion last year. And the state, even more recently... has transferred $650 million of FY 2018 general fund surplus to transportation over the next couple of years. If you look at NCDOT here in our backyard, four-year 2019 letting estimate $2.8 billion to $3 billion. And again, those are big numbers. That's a 35% increase over what we saw last year. And if we're looking at Georgia, they're looking at lettings of about $1.9 billion. That's 2x what we were seeing back in 2014. And if we're looking at what they're looking for in 2020, they've requested $2.1 billion in 2020. So that's a 10% increase. So I think back to your point, I think seasonality is what has affected infrastructure as we've come out of the gate. We fully expected it. The letting activity that we're seeing from the states is very good. and the backlogs that we're hearing from our contractor clients are often at record levels. So, again, I think we've got enormous conviction and confidence around where infrastructure is going this year.

Great. That's encouraging. And then if you look at, I guess, last one for me was you made a comment, Ward, about April 1st pricing in cement. Can you remind us how much you guys went out with? And I think you mentioned widespread support in north and central Texas. Just any other granularity around that? And I know you don't do a lot in Houston market, but just any other color on what you might be seeing in the Houston market?

No, happy to try to help with that. I mean, number one, seeing pricing up in Q1 is just nice to see, period, because to your point, the price increases for us in that marketplace really don't go back until April 1. And by the way, same answer on ready-mix concrete. So what we're talking about right now, North Texas is somewhere in that $6 to $8 per ton. In South Texas, $4 to $5. And that Houston and Central Texas, probably in that $5 range, Trey. So again, it gives you a good, steady snapshot of what it looks like. And again, fairly consistent with what we've seen over the last years. Pricing tends to be a little bit better in North Texas, a little bit weaker by the time you get to the Gulf, for reasons that you understand. Got it. All right.

Thanks for all the color, and congrats on the nice quarter.

Trey, thanks so much. Have a great day.

Thank you. You too.

Thank you. Our next question or comment comes from the line of Scott Schreier from Deutsche Bank. Your line is open.

Hi. Good morning. Thanks for taking my questions. Obviously, non-res was a pleasant surprise in the quarter. You had a significant year-on-year growth, and understanding that, it is a small quarter. But I'm curious if you could talk a little bit about, first, was there any impact from the Houston chemical plant incident? And second, was this non-res performance in line with your expectations, or did it outperform, and was there some pull forward? I just want to get a sense for what the bidding process looks and the cadence of the non-res, which seems to be a pretty good surprise in the quarter.

Yeah, several things I would say, Scott. No, the Houston situation was not particularly a driver for that. If we come back and take a look at really what we're seeing in states that matter the most to us, non-res for us in North Carolina is up nicely. Non-res for us in Georgia is up very, very nicely. So I think that's a lot of it. If we go and look at the nature of some of the non-res, it's got a nice enduring quality to it. You've heard us speak over the last several years about warehousing. You've heard us speak about data centers. You've heard us speak increasingly about wind farms. That level of activity continues to be really quite strong in our footprint. So I think a lot of what you're seeing on non-res, number one, is not a surprise to us. And number two is really driven by some states that population trends and employment trends have been very strong over the last several years, but volume trends haven't been as strong. And I think part of what we've been waiting for, and I think much of what the investor base has been waiting for, is to see states like North Carolina and Georgia really start to perform. So remember, one of the things that we've long talked about is the importance of that bottom right-hand corner of the United States map to our business. And as we look at what one of the big differentiators were or has been in non-res for the quarter, that was a piece of it. The other thing that I will tell you, and it's not so much a mover for the quarter, I think it's going to be a mover for the year, as we look at non-res, will be what's happening with those large energy projects in the Gulf. As you recall, we've been talking about a dozen-ish of those large jobs. that are either in action or we believe coming into action in the not-too-distant future. Today, we've got two different jobs with Exxon and one at Chenier LNG Train 3 in that marketplace, and we think more are coming during the course of the year. But back to your point, Scott, those were the primary drivers that we're seeing in non-res.

Got it. Great. And then I wanted to ask another one on cement and cement pricing, and your comment suggested that you have some confidence in the environment, but I just want to ask a little bit about that confidence, especially near Houston, where you've had imports as a risk. You have some of the global cement trade happenings that could influence multinationals' willingness and ability to import. We see the emergence of some independent cement terminals coming online in Texas. So I'm wondering how all of that plays into the environment for pricing in Texas, given that, of course, we know there's that supply and demand imbalance. But I just want to see if that throws a wrench in the mix a little bit.

Yeah, I guess my comments would be twofold. I think you finished with something that I think is an important point, and that is you do have supply-demand imbalance there. You've got more demand than you have supply, number one. Number two, in many respects, with the exception really in one notable case, the people who are importing are also domestic producers in that marketplace. And if you come back and reflect on it, while Texas is in fact the only state in which we have cement, our cement operations are actually number one in Dallas and number two in San Antonio. So if we look at the large cities in Texas, our drivers are really going to be DFW, it's going to be San Antonio, and then to a degree, South Texas and Houston. So I would say the supply-demand imbalance is very healthy for where we are. I think the pricing environment is more attractive. I think the fact that really you've only got one non-domestic producer who's coming in at any moment keeps things in a very steady state. even in that part of the state right now. So, again, if we're looking at how we view Texas cement this year, we have a very robust view of how that business is going to perform.

Great. Thanks for that warning. Good luck.

Thank you, Scott.

Thank you. Ladies and gentlemen, in order to get through the queue, we ask that you please limit yourself to two questions, please. One question and a follow-up so we can get as many people as possible. Our next question or comment comes from the line of Nishu Sud from Deutsche Bank. Your line is open.

Thank you. I wanted to follow up first on the aggregates pricing. On a mix-adjusted basis, the 1Q pricing was up around 6% year-over-year, so above the 3% to 5% that you're expecting for the year. Are we already seeing some of the pricing tailwind benefit from the strong start to the year? Uh, you know, and how, how would that, how do you, would you expect that to carry forward as we, as we go into the heart of the construction season?

An issue I would say maybe modestly, you're seeing some of that. What I would say is really, if you think about the work that's going early in the year, most of it's going to be work that was put into backlog last year. Um, so, so to the extent that things could be tighter in some markets before the end of the year is over, I don't think you're necessarily seeing that benefit just yet. Um, Again, I think the mix effect does mask what is the overall strength of the aggregates. I also think that in the fullness of time, particularly in some of the eastern markets, you're likely to see a bit more tailwind on that. But again, if we're coming back and saying, how do we see pricing right now? Do we feel confident within the guidance that we've put out? Yes, we do. And do we feel even better about the mix that we're seeing go out? I feel unquestionably better about that mix. The more base from my perspective, the better.

Got it. Great. And the second question, as you were discussing the improvement in performance relative to last year, one of the topics which you brought up again in terms of 2018 was the issue of contractor issues. labor constraints. As we think about this year so far, it's still early in the construction season, but is your one cue and the momentum coming out of the quarter evidence that some of those contractor labor constraints have begun to ease, or is it really more the weather, the early start to the construction season that you described in some parts of the country?

Nishu, I think it's probably all of the above. Clearly, the weather was better. I think backlogs for customers were better. But if we look at construction employment, too, it grew 3.4% in March of 2019 versus the prior year, and it's well above the national rate and building on a 4.3% growth last year and 3.4% growth in 2017. So if we're simply looking at the sheer number of people who are now coming to work or coming back to work in construction, It's growing, so I think, number one, that's gotten better. Number two, weather was better. I think the other issue is we're going to have better logistics this year with both truck and rail. So I think a number of the bottlenecks that we saw last year, are they going to be 100% gone this year? I'm certainly not going to bet on that. Are we seeing labor better right now for contractors than we saw a year ago? Absolutely, we are, which is why I come back and answer your question. I don't think it's one thing or the other. I think it's a confluence of factors that are actually working the way that we thought that they would.

Great. Thank you.

Thank you, Nishu.

Thank you. Our next question or comment comes from the line of Phil Inch from Jefferies. Your line is open.

Hey, guys. Heritage pricing in agaric and cement were very strong to start the year, and as you kind of flagged, A lot of the increases you guys have in place for spring actually don't kick in until April. So I guess based on what you've realized thus far and as that kind of flows through and trickles through over the course of the year, it seems like there's potentially some upside to the 3% to 5% of pricing that you've got. Any color on that front would be helpful. And is there an opportunity, I guess, if things are really tight and strong, maybe certain markets you guys go for a second round and back out of the air?

Yeah, it'll be interesting, Phil. Again, I think we're just, at this stage, just sticking with the three to five on price. I do think there can be some places this year, depending on how weather cooperates and otherwise, that it might get tight. Could I see some tightness in parts of eastern North Carolina? I think that's possible. Is it possible that you could see some tightness in some portions of Colorado? I think that's possible. Is it possible that you might see some tightness in some parts of the Midwest? I think that could be. So I think we'll simply have to watch that. As a general rule, we don't talk much about the notion of mid-years until we get closer to mid-years. We discussed last year the fact that the contractors prefer to go ahead and see whatever the price is going to be early in the year and have some sense that that's what it's going to be throughout the course of the year. I think that is typically what you're going to see, but I do think tightness can make some individual projects bid differently as we get deeper into the year.

Got it. That's helpful. In wording, you prepared, Mark, you talked about how transportation activity in some of your key states like North Carolina, Georgia, and Florida are starting to pick up both from a letting standpoint. Just from a timing perspective, I just want to get a better appreciation. Do you start seeing some of that flow through this year, or is it kind of more of a 2020 event and based on You know, the backlogs you had coming into the year and how it's shaping up for 2020, you stack things up from a growth standpoint. Do you think things accelerate even more in 2020 or kind of pretty steady 19 versus 2020?

You know, I think you're going to see a good pickup in 19. And part of what I'm taken by right now, Phil, and I haven't heard this as much in years past as I've heard this year. I've heard several contractors telling me early in this quarter, by this quarter, I mean Q1 in this instance, that they were already building work into 2020. So I think in many respects the infrastructure that is there, that has been bid, that we know is coming, is in many respects baked for 2019. I think what you're looking at is, particularly on the public side, a level of bidding and letting activity that I think at this point starts building into a very steady 2020 as well. I think your commentary on that is entirely correct.

Okay. Thanks a lot. Good luck at the quarter.

Thanks, Bill.

Thank you. Our next question or comment comes from the line of Jerry Revich from Goldman Sachs. Your line is open.

Hi. Good morning, everyone. Hi, Jerry. Ward, I'm wondering if you can just expand on your pricing comment. So, you know, like for like, pricing is up 6%. This quarter, and I'm just trying to square that up with the comments on the full year guide and the discussion you just had a moment ago, I guess it sounds like from just a spot market basis alone, there should be upwards pressure to the guidance. So I'm just wondering, is it just back to your volume comment earlier on the call? Is it too early in the year? to revisit the pricing outlook or are we expecting the mix headwind to go from 200 to 300 basis points? I guess I'm trying to square that up. Is it just a function of it's early to the year and let's just see how next quarter develops versus no, the pricing is set. We have large work coming that's at preset prices. Can you just help me square that up?

No, I can't. And Jerry, I think you nailed it there in the middle. It's just too early in the year right now. We don't see anything that makes us lose our conviction on pricing. Pricing this year, from our vantage point, looks more attractive than pricing did last year. I don't see anything that's going to materially change that. I think your point is entirely on target, and that is it's the first three months of the year. And important markets like Colorado didn't even wake up because, as I like to tell people, they had a wonderful ski season and a really bad construction season this year. So we're going to wait and see what this looks like when the entire business across our enterprise is really going. And yet the odd thing is, Jerry, that truly doesn't happen usually until the 1st of May because if you think about it, some of the Midwest is still simply coming out of a flooding circumstance as well. So it's certainly not due to any lack of conviction. We're just not going to get in over our skis after just three months into the year.

Okay, I understood. And then in terms of the results from a non-res standpoint, really strong in the quarter, is that just an easy weather comp in a certain area, or did you win one of the major infrastructure projects in terms of LNG and chemicals? How much was that in the mix? And your comment earlier, just a clarification on the infrastructure piece, So when exactly do you expect, based on shipment timing, to see an acceleration from the low single-digit range that we saw in the first quarter towards the high single-digit run rate that you expect the balance of the year?

With respect to your first question with respect to non-res, it was really more driven by just broad, solid non-res activity across the enterprise. But as I indicated earlier on, you did see a couple of states – that are seeing particularly strong non-res gains. And, again, that's North Carolina and Georgia. So when we're seeing that, that does help us pretty considerably. To the second part of your question, no, there was not any particular big project in the Gulf or otherwise that served to skew that or make it look more attractive. I just think we're sitting in a place that non-res for us is likely to be pretty attractive this year, and it came out of the box in a good, strong way. And I do think there has been some pent-up demand there, but I think there are also good backlogs that continue to be being built by our contractor base right now, Jerry.

Okay, thank you.

Thank you, Jerry.

Thank you. Our next question or comment comes from the line of Stanley Elliott from Stiefel. Your line is open.

Hey, good morning, everyone. Thank you for taking my question. A quick question on CapEx expectations. You've been spending above depreciation probably like four or five years now. How long should we think that that continues? What do we think about kind of moderating that back, first part? And then second part, maybe speak to some of the cost savings programs that you all have underway, I think which is partly due to some of the CapEx that you've been running at a higher level.

Stanley, good morning. Thanks for your question. A couple of things. You're entirely right. If we look over the last several years, we have been spending CapEx at above DD&A levels, and oftentimes we refer you to DD&A levels because that's not a bad number for you to keep in mind on what a stay-in-business CapEx number would look like. What I think you'll see is if you look at the range that we set up for CapEx this year, it's actually getting closer to a DD&A level. So you've actually seen that very naturally and gradually. And I would submit to you appropriately come down simply because we've spent some money in some very careful ways, and the organization in many respects is as well capitalized today as it's ever been. What I'll do is turn it over to Jim to talk to you a little bit more about some of the specifics in the CapEx program, but I wanted to make sure to your point that that we were level set relative to history, the fact that we were below DD&A during the downturn above now getting closer to DD&A.

Yeah, so we, as we mentioned, our DD&A has converged with our CapEx spending, by and large. Five years ago, that wasn't the case. We were coming out of the recession, had to make up some lost ground. We've done that, by and large. And if you look over time, our CapEx as a percent of revenues has ranged from, you know, 8% to 10%, and we've been trending lower. So the last couple of years, closer to 8% and we expect it to stay right around that spot. So we feel pretty good about that. Some of the specific projects, we've got some large mines that we're moving underground. Those have been ongoing. Those should be wrapping up in the next year or two. But we also want to keep some powder dry for opportunistic commercial activities if we have a chance to to partner with a contractor in unique ways. We want to keep some dry powder for that. And we've been deploying, and we'll be deploying some money on special projects that, A, provide outsized returns, and, B, help us ensure ongoing business with that contractor.

Perfect. And then, Jim, in your comments, you'd mentioned M&A. I mean, does that still seem to be kind of a high-tech item for the company right now, or is that just kind of, messaging more that you're consistent with kind of the capital redeployment strategy that you've had in the past.

Yes, Stanley, I think if you go back and look at the capital allocation priorities, the right transaction continues to be at the top of the list for us. So, for example, when we look at the way Bluegrass is performing for us, you know, hitting the EBITDA margins that we thought we would see, we're seeing synergies nicely in advance of the $15 million that we had indicated at Marketplace that we would be getting today. That's my long way of saying the right transaction continues to be the number one capital priority for us. Investing in the business is pretty close behind that and making sure that we have it well done. And then returning cash to shareholders through a meaningful and a sustainable dividend and the share buyback. So those have been staples to our dialogue over the last several years and they continue to be and in that order.

Perfect. Thank you very much and congrats on the strong start to the year.

Thanks so much, Stanley.

Thank you. Our next question or comment comes from the line of Garrick Chamoy from Longboard Research. Your line is open.

Garrick, I heard something, but I didn't hear a full question.

Sorry, can you hear me now?

Yeah, I can. Thanks, Garrick. Good to hear your voice.

Yes. So I wanted to ask just on volumes and on res in particular, how much – of the volume do you think might have been pulled forward into the quarter, just given the favorable weather? Do you characterize any risk that we'll have a vacuum in demand in the second half of the year, just given the earlier start to the season?

I'm going to ask my partner in crime, Jim Nicholas, to respond to that part, and I'll circle back to you, Gary.

Yeah, I think it's actually the reverse of being pulled forward. It's a bit more of a carryover from Q4 that there's been a slowdown in some weather-impacted delays. So I think if there's any weather movement, it's benefiting Q1 from the poor Q4 we had. I don't think it's as much a pull forward from Q2 or Q3.

And, Gary, I guess what I would say, too, is I think it's possible that you might start seeing some tonnage going to those large energy projects this year that we do not have specifically committed right now. So I think if I'm looking at non-res across our enterprise, I echo what Jim said, but at the same time, I don't see something relative to activity or inactivity there that causes me any degree of concern or pause as we look at it. I think non-res is going to be a very strong segment for Martin Marietta this year.

Okay. Okay. And then my follow-up question is just on inventories. You talked about the drawdown in Q1. I was wondering if there's any way, Jim, to quantify that in aggregates. And then as you rebuild inventories over the remainder of the year, how should that impact incremental margins? Should we expect, perhaps, incremental margins?

You're breaking it up there, but I think I got the gist of your question, Eric. So we did draw down inventories to some degree this quarter, and that was a mild, I'll call that a mild headwind. But as we build inventories in the remainder of the year, that should act as a tailwind for us. So that should be helpful.

Okay, thank you.

Thanks a lot, Gary. Thank you. Our next question or comment comes from a line of Timna Tanners from Bank of America Merrill Lynch. Your line is open.

Yeah, hey, good morning, everyone.

Good morning, Timna.

I wanted to ask, I know you mentioned that your cash use priority was debt pay down, but you did buyback shares in the second half of last year, and I just wonder if you can remind us how you think about the timing decisions for buybacks?

Yeah, so we're focused on remaining investment grade and deleveraging, as we stated when we bought Bluegrass. But of course, We resumed the share buyback in the last year, and we're still on that path. Q1, seasonally low or light quarter for us from a cash flow perspective, so we held off. But we expect to resume the rest of the year by deploying some of our cash for share purchases.

Tim, we try not to look at it just in a strictly – rigid way either. We want to be realistic, and when we can, we want to be opportunistic with it. So we try to look at it in a very clear-eyed fashion.

Okay. And then just wondering if you have any of your, if you could update us on your latest thoughts or what your sources in Washington are saying about funding sources for the next highway spending program. I know it's a little bit early, but we're just starting to We've been seeing more headlines about the two sides of the aisle perhaps coming together, different funding sources, whether it be gas tax increase or actually per vehicle kind of monitoring sources. So just wondering if you have any updated thoughts on how that's going to play out.

Well, I guess I know what you know, and that is I believe the President and Speaker Pelosi and Senate Democratic Leader Chuck Schumer, I think, are supposed to meet today to discuss infrastructure. I think there's several things to watch. I think between now and clearly August is going to be an important time. Clearly, you've got the U.S. Chamber and others who are very focused on a near-term gas tax increase, and I think that's the important phraseology to put to it near-term. because the simple fact is the United States is going to have to, in the fullness of time, move away from a gas tax and come up with other mechanisms. I think those mechanisms include vehicle mileage tax on trucking. I think it can include electric battery taxes. I think it can include, to a degree, an indexed gas tax. I think the table is fairly open on what those can be, and I think what's going to be fascinating is to see how interested people the Republicans and the Democrats are to actually work together on this. It is the one area that we believe there is bipartisan agreement. I think if they're going to get there, they need to get there sooner rather than later, because once we get into election season, it gets increasingly challenged.

I know, it's a tough question asking about politics, so I appreciate your thoughts on it. Thanks again.

You're welcome, Tim.

Thank you. Our next question or comment comes from the line of Rohit Seth from SunTrust. Your line is open.

Hey, thanks for taking my question. Just one of the hot topics this quarter has been on the Mississippi River flooding, and I know you guys have some exposure to Iowa, Nebraska, and some of the neighboring states, and your Kenrock Rail volumes were a little bit weak. Just maybe you could speak on that and just give us the status of what's going on over there.

You know, I guess what I would say, you're right. There has been some flooding. As you recall, we're not up and down really that Mississippi River market anymore, but we do have some flooding that has hit our businesses in the Midwest. Now, when I say that, we haven't suffered in our quarries with flooding, but local communities have certainly suffered from it. And what I'll tell you, too, is there is tonnage that's required to come behind these storms. If we're looking... At our current backlog or customer backlog in the Midwest specifically, it's 59% over where it was in the prior year, and that's a pretty big number. And a good bit of that has been some shot rock that has been required already to be used to help remedy some of the flooding and shot rock that we think will continue to be required over the next several months to do that as well. So at least last year when Hurricane Florence came through, we had flooded pits. In the Midwest, we do not have flooded pits. Let me be really clear on that point. But I do think from a business perspective, it will generate some activity. It certainly creates individual pain and loss for families, and our hearts and prayers and money and resource go out to them in many instances. But I do think that's where we sit relative to a business snapshot on that issue, Rohit.

Gotcha. Okay. And then on variable costs on diesel and asphalt, maybe you can give us a sense of your outlook on those for the rest of the year.

Yeah. I mean, here's what I'll say. I mean, if we look at really where diesel was, first quarter expense was relatively flat on a 7.4% reduction in per gallon pricing. Now, the difference was we also had 7.8% increase in usage simply due to bluegrass. So, we're just going to have to see where that goes for the rest of the year. We are not hedged on diesel. The primary hedge we have on that, as you recall over years, has been relative to what we contend to do with respect to average selling price. But at least as we look at diesel in the first quarter, relatively well behaved. As a reminder, last year for the full year, we used a little bit over 47 million gallons of diesel fuel, and that was not having bluegrass with us in the first quarter. You know, obviously liquid asphalt is up for the year. We think that actually probably works relatively well to asphalt pricing. And we've seen relatively flat natural gas pricing, and that can matter to us, particularly relative to costs with respect to our magnesia specialties business. So, again, we're looking at an overall input cost situation that we don't think is unattractive at all.

Gotcha. Okay, and then final question on, you know, we talked about the base stone potentially impacting the mix, but you had really good heritage pricing in the quarter. Is the guidance inclusive of that mix headwind, so all in, you know, good underlying pricing, but potentially some mix of base stones?

We do our best to look at the mix and see where we think it's going to be. We felt like because of the increased infrastructure that there would be more base activity this year. I think we probably saw a little bit more base activity earlier than we thought we would have. So we have done our best to apply, in many respects, what I hate to say is some art to that. So that's where we are. Obviously, by the time we get to half a year, we're going to have a much better feel for it. But I think you get a sense of what the puts and takes are right now.

But then the Baystone is not a margin head when it's just an optic thing, right?

It is absolutely positively an optics thing. That's entirely correct.

All right. Thank you very much.

Thank you, Robbie.

All right. Bye.

Thank you. Our next question or comment comes from the line of Adrian Huerta from JP Morgan. Your line is open.

Thank you for taking my call, and congrats on the results. Two questions, if I may. One on M&A. Are you starting to see valuations getting more expensive to acquire aggregate queries? And my second question has to do with the bluegrass prices that I really think We're already 15% below your prices, and they seem to be at the same level. Do you see the opportunities for the coming quarters for that to close? Thanks.

Adrian, good morning, and welcome to the call, and welcome to covering our company. We're delighted to have you. Just a couple of things. M&A, what I would say is it completely depends. It depends on sellers' expectations. It depends on what we think can be done with the business. Do I think sellers' expectations have gone up? as the industry has very modestly recovered over the last several years. Yeah, they have. But at the same time, in the right markets, are we able to find M&A transactions that can be incredibly value-creating for our shareholders? The answer is yes. Does it mean that you're going to have to be a bit more selective on some of those? I think the answer to that is yes as well. We've tried to be really disciplined in what we look at, and we try to be really disciplined in our due diligence process. If it makes sense... We tend to move on it. I think if you go back and look at our history on transactions that we've done, they've tended to work very well. Now, what you don't see are the transactions that we've walked away from. So are they more expensive today? Yeah, they probably are. Is there good value there to be found? Yes, they are. Your other question, it's a perfectly fair one, is with respect to Bluegrass and how that looks relative to Bryson. We've said in our headline numbers that that their ASPs tend to be 10% to 15% below our heritage business. I think that's entirely true. I think what you'll see probably over the fullness of time is you'll see things probably move a little bit better in the nearer term in places like Georgia. I think you'll see them then move in medium term more in places like Maryland. I think markets such as Kentucky, which simply does not have the type of robustness in many respects that you have in places like Georgia and Maryland, will move upwardly in a little bit slower rhythm and cadence, but nonetheless, I think in a rhythm and cadence that will be value-creating, very appropriate, and by the way, from our perspective, not at all surprising.

Thank you so much. I appreciate your feedback.

Thank you, Adrian. Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. Our next question or comment comes from the line of Michael Wood from Nomura Institute. Your line is open.

Hi, good afternoon. First quarter, you typically see some losses in asphalt, so that's not unusual. But, you know, there was no improvement since last year, and last year I know you were lagging the recovery of inflation. Can you just give some color there in terms of what you're seeing on price cost and what pricing on asphalt is looking like as the construction season gets underway?

Yeah, I guess I would say a couple of things to your point. Q1 volumes were down 29%, but winter had the biggest impact on that simply due to temperature and specifications. So the front range had a real winter this year. It was colder. It was wetter. And clearly we felt that. If we're looking at pricing, Q1 asphalt pricing was actually up 4%. So we think that's a nice harbinger of things to come for the year. If we're looking at Q1 asphalt and paving backlogs, and this is what I think is really important, Michael, they're up 60%. So, I mean, you know, that's a very nice pipeline that we have on the business. If we look at the way it's spread across the business, too, that's important because in keeping with the commentary we've had on the call so far, Q1 infrastructure up 46%. Q1 res up 39%. Q1 non-res up 15%. All these versus the prior year quarter, again, in that Colorado business. So if we're looking at what the downstream business is looking like there, we think it really is very attractive. We talked about some of the cash flow issues that Colorado DOT had last year that we think that they've clearly found their way through. So we're feeling very confident on that business right now. If we look at our overall infrastructure Q1 backlog in asphalt, it represents 50% of the total asphalt and pavement backlog versus 46% last year. So it's not just that we feel like we've got good work ahead of us. We've got good work ahead of us in areas that we anticipated that we would have good work.

Great. That's very helpful. And then in terms of the Texas cement market, just curious what is needed there in terms of growth for demand to outstrip domestic supply, and roughly what can you tell us on the import price differential versus domestic pricing?

I guess what I would say is would there be room to add a few hundred thousand tons here or there in Texas? There probably could. At the same time, That's a marketplace that we're pretty happy with the way that that marketplace is working right now. So we don't feel the need to add much to that. I would think the import in Houston, the differential can be, let's call it low 20s, delta on occasion. but then you've got transportation logistics that come into play once it gets there. So it can move around pretty considerably, Michael. That's a tough number to nail with precision.

Great. Thank you.

Thank you.

Thank you. Our next question or comment comes from the line of Adam Follimer from Thompson Davis. Your line is open.

Hey, good morning, guys. Nice quarter.

Thanks, Adam.

Hey, Ward. April was a little wetter. year over year. Did that give you any pause vis-a-vis the guidance?

Yeah, I'll tell you, the one thing that you've always seen us do is draw a really bright line between the quarter just ended and the new quarter that's starting, because I know if I ever say anything about it, then people will think, well, he's talking about it because he's good, and if I don't say something, they're going to extrapolate. He's not saying anything because it's bad. I will tell you, Part of what you've heard us say is we feel really good about the year right now, Adam, and I feel really good about the year.

Okay, fair enough. And then the last thing, I was just hoping you could walk us around Texas. What are you seeing in the major metros for this year?

Oh, look, I'm happy to try to do that. Look, I think Dallas-Fort Worth is going to continue to be a really attractive marketplace. I mean, part of what I like about that marketplace is is it stays good on both the public and the private side. We've talked about what's happening there relative to the large design build work that's coming, but here's what's important about that, Adam. I mean, you've got $1.6 billion worth of design build work around 635 in Dallas, but there's $520 million of it going on in Austin. There's $4.2 billion of it in Houston and $1.8 billion coming in San Antonio. Actually, what I think we're going to see this year, and we like this, is we're seeing a much healthier central Texas or San Antonio than we've seen over the last several years. Looking really at those marketplaces, that's been one of the tougher ones in Texas. And what's striking to me is still if we're looking at employment metrics for the state, Texas is still ranked first as of March 19 in employment growth versus the prior year. But think of it in these terms, too. I mean, Texas, with all the growth that it's had, is still second in total housing permits and second in single-family permits and number one in multifamily. So when we look at all of that, then come back and say, you know, what could the prospect of that state look like when these energy projects really come to some degree of fruition with 24 million tons of aggregates, 2.9 million cubic yards of ready mix, and 1.6 million tons of cement? These are all pretty striking numbers in a state where we've got the largest aggregates, cement, and ready mix position in between Dallas, Fort Worth, Houston, and San Antonio. So that's a long way of saying, you know, I listened to economists four and five years ago say Texas was going into a slowdown. Our team all looked at each other at the time and said, we don't see it. And we continue to see a very healthy Texas marketplace.

Great. Thanks, Morton.

Thank you, Adam.

Howard, are there any others in the queue? I'm showing no additional audio questions in the queue at this time, sir.

Well, thank you for joining our first quarter 2019 earnings conference call. With our steadfast commitment to safety, cost discipline, and operational excellence, Martin Marriott is well positioned to deliver continued growth and enhance shareholder value. We believe 2019 will be another record year for Martin Marietta, and we look forward to discussing our second quarter 2019 results in July. As always, we're available for any follow-up questions. Thank you for your time and your continued support of Martin Marietta.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.